Based on 66 OTT providers, led by Netflix, Hulu and Amazon, U.S. OTT access revenue grew 37% to $16.3 billion in 2018 and is forecast to reach $22 billion in 2019, according to a new research from Convergence Research.

The research firm has released two new reports, “The Battle for the American Couch Potato: OTT and TV” and “The Battle for the American Couch Potato: Bundling, TV, Internet, Telephone, Wireless.”

Still, U.S. TV subscriber average revenue per user (ARPU) is still forecast to be three times U.S. OTT subscriber household ARPU in 2021.

The firm estimates 2018 U.S. cable, satellite, telco TV access (not including OTT) revenue declined 3% to $103.4 billion in 2018 and forecasts 2019 will see a similar decline. Also, 2018 saw a decline of 4.01 million U.S. TV subscribers and 2017 a decline of 3.66 million, according to the firm, which forecasts a decline of 4.56 million TV subs for 2019. The U.S. TV subscriber
base will decline 5% in 2019, from a decline of 4% in 2018, according to the firm’s estimates.

By the end of 2018, the firm estimates 30% of households did not have a traditional TV subscription with a cable, satellite, or telco TV access provider, up from 26% at the end of 2017. The firm forecasts that number to reach 34% of households by the end of 2019. Convergence Research estimates 2018 saw almost 5 million cord cutter/never household additions.

The firm projects that a number of OTT plays, including large and niche, will fail due to insufficient subscriber traction, cost and competition, noting major programmers continue to accelerate their direct-to-consumer drive, including Disney and WarnerMedia. Other developments noted by the firm include:

Hulu spends more on content per sub than either Amazon or Netflix and continues to discount (notably with Spotify);

CBS/Showtime’s OTT subscriber trajectory has been faster than expected;

Discovery has backed and supplied Philo, gone live with Hulu, Sling and YouTube TV, and will be launching an OTT service with the BBC;

NBC Universal will be launching an OTT service in 2020;

and Viacom has backed and supplied Philo and others, acquired Pluto and Awesomeness TV and is producing for Amazon and Netflix.

Speakers discussed changes in digital entertainment content, stars, business models and more during the Digital Entertainment World conference Feb. 4 in Marina del Rey, Calif.

Digital Media Wire founder Ned Sherman noted that in the past year the industry produced nearly 500 original scripted programs, the majority of which for the first time came from streaming services.

“There’s almost sort of an arm’s race going on in this space,” he said, noting the billions being spent on programming by Netflix and other streaming services.

Speakers discussed the advantages and disadvantages of subscription streaming models (SVOD), ad-supported free streaming models (AVOD) and graduated spending models, such as Hulu’s, which has both ad-supported and ad-free services.

The acquisition will “accelerate what we’ve already built,” he said. Pluto TV is “the leading free streaming television service in America,” with 12 million monthly users and 100 channels, he said.

Free AVOD fills an important need as “there has been a certain amount of subscription fatigue,” he said.

“The problem comes down to payment,” he said. “There’s only so many services that people will pay for.”

He mentioned a survey by Ampere that found the average SVOD home subscribes to 2.8 streaming services.

“You have Netflix and Amazon Prime, and everybody else fighting for that 0.8,” he said.

He said that, rather than creating channels that match those on traditional cable,

“we will create new channels that include content from Viacom.”

“I think AVOD content has been a big theme to start out this year,” said Ellation’s Eric Berman in “The Future of the Television Business” panel.

“There’s a big conundrum in the AVOD model,” said Popsugar Studios’ David Grant on the same panel. “Somehow the content has to be created.”

Viacom is buying Pluto TV, but the AVOD service is “not funding that content,” he noted.

“When is the AVOD system going to be able to fund the creation of television-sized content?” he asked.

The very nature of content is undergoing a transformation, speakers noted. Digital content isn’t constrained by the need to fill a half-hour sitcom slot or hour-long drama. It also can explore niche subjects.

As opposed to globalization, “for me the greatest power of digital is actually localization,” noted keynote speaker Gerrit Meier of the Red Bull Media Network, which creates programming around sports such as surfing and mountain biking, among other subjects. Through the internet, local communities around the world can find a voice, exposing sports “that I have never heard of before,” he said.

In designing mobile content, “I’m competing with everything that’s on a person’s phone,” he said. It must be engrossing in the mobile space, he noted.

Digital stars, too, have a new style. They exude authenticity and communicate more closely with their audiences.

“We are always looking to populate our projects with people who have relevance in the social media space,” said Shelley Zimmerman, co-head of digital media company Awesomeness (owned by Viacom).

Studio71’s Dan Weinstein noted that the new digital stars are more relatable, as opposed to the “untouchable” movie stars.

Speakers also discussed augmented and virtual reality.

Hilary Hoffman, EVP, global marketing, Universal Pictures Home Entertainment, detailed a Jurassic World campaign that used augmented reality to allow Facebook users to view dinosaurs that jumped out at them at retail and at home. She said the campaign was much more successful than anticipated, but that monetizing AR will require more ease of use.

“Right now, it’s more promotional,” she said, but it “has so much great potential.”

LAS VEGAS — For Viacom, content truly is king, according to CEO Bob Bakish, who is forging a “culture of content” at the company.

“I continue to believe there’s a lot of value in assets that we already own,” he said Jan. 9 during the Variety Entertainment Summit at the CES show in Las Vegas.

While the Walt Disney Co., with its Fox merger and pending SVOD service, and WarnerMedia, through the AT&T merger and its own pending streaming service, are leveraging consolidation for greater distribution clout in the fragmented market, big deals aren’t necessarily the best path, he said.

“Vertical integration is very much in vogue,” but historically it “doesn’t tend to work,” Bakish said.

“Bigger is not always better,” he said.

In fact, rather than bulking up to compete with online services, he pointed out Viacom produces shows for Netflix, Amazon and Facebook. For instance, the show “Jack Ryan” is on Amazon. The company launched Viacom Digital Studios to produce social media friendly content for outlets such as Facebook.

“Viacom doesn’t really require a transformational deal,” he said. Instead, the company is doing what he calls “accelerant deals,” such as recent pacts to acquire VidCon, which celebrates online video creators, and Awesomeness TV, which produced To All the Boys I’ve Loved Before released on Netflix.

The goal is “unlocking opportunity through truly multi-platform distribution,” whether it be AVOD, SVOD, legacy platforms or other models, he said.

“Relative to some of our peers, we’re further along in this transition,” he said.

One of the new technologies he is enthused about is the coming 5G mobile delivery standard.

“Mobile distribution is what will turn this [content monetization] decline on its head,” Bakish said.

5G and the move to 10G for traditional TV distribution will both expand the pipelines for content, he noted.

He’s also intrigued by self-driving cars, which will open up more free time for consumers to view entertainment.

Content owners cannot “crawl into the ivory tower” and hope the future will go away, he said.

“You can look at this transformation as glass have full or half empty. I’m half full,” he said.

The platform is the brainchild of AwesomenessTV, which was founded in 2012 and acquired by Comcast in 2016 as part of the DreamWorks Animation deal for $3.8 billion.

“As we continue to grow the DreamWorksTV brand, this is an exciting step for us to explore revenue streams and brand engagement across platforms,” Brik Rawlings, head of DreamWorks TV, said in a statement.

But transforming a viewer base predicated on free access to paying subscriber could be a challenge.

YouTube – the world’s largest video streaming service – launched $10 monthly SVOD service YouTube Red in 2015. To date, it has just 1.5 million paying subs, including another 1 million trial subs.

“While we don’t release or comment on speculative numbers, we’re seeing strong engagement of the service in the four countries we’ve launched, leading us to invest in more originals series and movies,” a YouTube spokesperson told The Verge in 2016.